The gas cooperation between Russia and Germany, which began fifty years ago, is about to come to an end. In fact, on September 4, 2022, German Chancellor Olaf Scholz announced that the country plans to completely stop the supply of gas from Russia until December 2022. Stating that Russia cannot be called a reliable energy supplier and that Moscow is no longer fulfilling its obligations arising from gas agreements, Scholz said that Germany is looking for an answer to the question of “What will happen if gas supply from Russia is cut off as of December 2021?” and has started to prepare for such a scenario. Scholz stated that Germany is actively replenishing its gas reserves and will continue to fill them in winter.
Since the summer of 2022, Gazprom has gradually reduced the flow of gas from the Nord Stream-I Pipeline. Between August 31-September 3, 2022, Gazprom completely stopped the flow of gas, justifying this decision with planned repairs. On September 3, 2022, it was learned that the gas storage facilities in Germany were 85% full despite the supply being cut off via Nord Stream-I. In the summer months, amendments were adopted in Germany requiring gas storage facilities to fill 85% by October 2022 and 95% by November. However, the Berlin administration announced that it had completed this plan prematurely.
As it will be recalled, a long-term agreement was signed between the leaders of the Soviet Union and the Federal Republic of Germany in February 1970 on the construction of a gas pipeline from the Soviet Union to Western Europe and the supply of Russian (Soviet) gas. The agreement was called the “Deal of the Century” because it was the largest compromise in the history of the Soviet-German and Soviet-European agreements. After the collapse of the Soviet Union, Russia and Germany began to develop a new geopolitical relationship in the field of energy.
In 2005, an agreement for the German-Russian partnership was signed between Russian President Vladimir Putin and the then German Chancellor Gerhard Schröder. The Nord Stream-I Project, which will reach Germany under the Baltic Sea, while supported by Russia, Germany, the Netherlands and France, this project was opposed by transit countries, the Baltic states and the US. The main objective of the project was to increase the supply of gas to the European market and reduce dependence on transit countries.
Following the agreement, the construction of the Nord Stream-I Gas Pipeline Project was started in 2005 on the territory of Russia and in the European part in 2006. In 2006, in order to gain more German support, Putin offered him the chairmanship of the Gazprom Supervisory Board after Schröder resigned. Schröder, who accepted this proposal has become the lobby of Russian energy policies not only in Germany, but also in Europe. In fact, at the Baltic Sea Summit held in June 2008, Lithuania and Estonia, which previously opposed this project, announced that they had no objections to the project thanks to these lobbying activities. In fact, Latvia has even expressed its support for the project.
Following the completion of the Nord Stream-I Project in 2012, Russia and Germany initiated negotiations on a second project. In September 2018, the construction of the Nord Stream-II Gas Pipeline Project began. However, most states, especially the US, have opposed the initiative on the grounds that it is a geopolitical project that serves the interests of Russia. In the last months of 2021, the Washington administration decided to sanction against the Nord Stream-II Project.
Following Russia’s intervention in Ukraine in February 2022, Germany also announced that the Nord Stream-2 Pipeline would not be put into operation. In the face of sanctions against Russia, Moscow has also begun to damage Europe’s energy market and economy by interrupting the flow of gas. This has shown that Russia, which has been trying to maintain its status as a reliable supplier for a long time, will no longer comply with this principle.
Against Berlin, which claims that Russia triggered the energy crisis on the European continent and did so consciously, Moscow argues that the claim does not reflect the truth and that European politicians are guilty of the developments that have taken place. For example, Deputy Chairman of the Russian Security Council Dmitry Medvedev saying that Germany behaves like an enemy of Russia, imposes sanctions on the country and its citizens, and supplies weapons to the Ukrainian Army, while the German Chancellor should not be surprised that his country is experiencing economic problems.
Similarly, Russian Deputy Prime Minister Alexander Novak suggested that gas prices in Europe could rise further. According to Novak, the “collapse of Europe’s energy markets” is due to the “short-term policies” of Europeans. On the subject, Novak made the following comment:
“Gas for industrial enterprises in Russia is 40 times cheaper than in European countries. By comparison, 1000 cubic meters of gas costs 70 dollars for industrial consumers. For citizens, it’s even cheaper. On the stock exchanges in Europe, 1000 cubic meters comes to 3000 dollars. This is our competitive advantage.”
Novak also said that Europe paid 350-400 billion euros for energy resources in 2021 and will pay 400 billion euros more in 2022. As can be understood, Russia is trying to harm Europe economically. Whether Germany, which is dependent on Russia’s energy resources, will be able to find an alternative to Russian gas, which has been cut and wants to end completely by 2023, is a question mark.
Currently, important negotiations are being held with Middle Eastern countries in order to diversify the energy supplier. There are even some agreements. The priority issue for Germany, the largest economy in Europe, is to be able to survive the winter period. Berlin intends to achieve price balance with the resources in gas storage facilities during this period. Moreover, in the future, it will also begin to reuse other energy sources.
In the current situation, the countries of the Middle East have shown that they are ready to replace Russia. It is thought that the US, which has an important place in the global energy markets, will also help Europe in general and Germany in particular. Despite knowing that it will cost more than Russian gas, the Berlin administration continues to buy alternative sources to ensure energy security.
The end of Russian-German cooperation in the field of energy will also have negative consequences for Russia. First, Russia will lose its position as a reliable supplier. In fact, this situation, theoretically, will create a serious trust problem even if Russian-German relations improve. Second, there will be a huge loss of market for Russia. Russia will be deprived of its existing revenues; it will be difficult to take part in the market even if it becomes a candidate for the European market again in the future. Third, it can be said that Russia’s energy sector may face major problems. The gas sector, which is deprived of the large European market, may seek to reduce the production of energy resources. Therefore, investments in the sector may stop. In addition, Russia, which has been excluded from the European market, may become dependent on the demands of non-Western countries such as China and, in the future, India. As seen in the oil market, Russian oil, which is subject to the Western embargo, is sold to China and India 30% cheaper. A similar situation can be experienced in gas. It is likely that the party that determines the price is not Russia, but the consumer country. This could again lead to Russia becoming passive situation.
Ultimately, Germany’s decision to end its energy cooperation with Russia would vindicate those who have long criticized Berlin for this cooperation. Because billions of dollars spent on cooperation for twenty years will be considered wasted. Because energy prices in Germany, and in this context, the country’s economy, will face serious uncertainties.
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